{"id":336732,"date":"2017-03-25T04:15:23","date_gmt":"2017-03-24T20:15:23","guid":{"rendered":"http:\/\/techcrunch.com\/?p=1468749"},"modified":"2017-03-25T04:15:23","modified_gmt":"2017-03-24T20:15:23","slug":"the-sec-and-doj-just-dropped-their-inquiries-into-hampton-creek","status":"publish","type":"post","link":"https:\/\/people.utm.my\/asmawisham\/the-sec-and-doj-just-dropped-their-inquiries-into-hampton-creek\/","title":{"rendered":"The SEC and DOJ just dropped their inquiries into Hampton Creek"},"content":{"rendered":"

<\/p>\n

The SEC and the Department of Justice, which had\u00a0launched preliminary inquiries into the vegan food company\u00a0Hampton Creek<\/a> last summer, have officially closed their inquiries, according to founder and CEO Josh Tetrick. He informed the company\u2019s 160-plus employees of the status change this morning in an email that you can find below.<\/p>\n

Tetrick called the news\u00a0\u201cthe expected result by our leadership, board and investors.\u201d Yet not everyone was\u00a0so confident in a positive\u00a0outcome\u00a0after a two-part\u00a0Bloomberg investigation<\/a> attracted the government agencies\u2019 attention. At the heart of Bloomberg\u2019s findings was\u00a0that Hampton Creek\u00a0had executed on a campaign to buy back mass quantities of its eggless mayo product, Just Mayo<\/a>, in an attempt to artificially inflate demand and, potentially, dupe investors.I<\/p>\n

In reaction, the company\u2019s board hired one of the Big Four accounting firms to investigate Bloomberg\u2019s claims, which the board has said it had no knowledge of until contacted by Bloomberg\u2019s\u00a0reporters last fall.<\/p>\n

A source close to the board told us at the time<\/a> that if Tetrick and other managers were discovered to have been \u201cbuying back mayo solely for the purpose of juicing the numbers,\u201d the board would be\u00a0\u201clivid.\u201d<\/p>\n

Whether they\u2019re now\u00a0patting Tetrick on the back instead isn\u2019t yet clear. One of the company\u2019s few board members didn\u2019t respond to a request for comment earlier. A request for comment from Tetrick also went unanswered.<\/p>\n

The SEC\u2019s decision may not come as a complete surprise to industry watchers. The commission is largely expected to spend less time focused on Silicon Valley under President Trump\u2019s administration. In fact, his pick as SEC chair, Jay Clayton, told lawmakers during a nomination hearing yesterday he would like to\u00a0pare back<\/a> regulations on startups. (Former SEC \u00a0chair Mary Jo White felt rather differently<\/a> about whether Silicon Valley needed more policing<\/a>.)<\/p>\n

But\u00a0Hampton Creek has\u00a0more to celebrate than the agencies\u2019 closed inquiries. Perhaps even better news for the company are the conclusions\u00a0of that Big Four accounting firm investigation, which were also just released.<\/p>\n

While the audit has confirmed Hampton Creek\u2019s\u00a0buyback scheme, a source close to Hampton Creek\u00a0also tells us it found the company\u2019s buyback operation was far smaller than suggested in Bloomberg.<\/p>\n

Specifically, according to Bloomberg\u2019s sources<\/a> \u2014 which reportedly\u00a0included a former accounting employee\u00a0\u2014 Hampton Creek used several expense categories on its profit and loss statements to disguise buybacks, including one line item called \u201cInventory Consumed for Samples and Internal Testing.\u201d<\/p>\n

Bloomberg further\u00a0states that over a five-month period in 2014, Hampton Creek\u00a0expensed about $1.4 million under the category, compared with $1.9 million of net sales in the period. That\u2019s almost 75 percent of net sales. Per the\u00a0newly released audit \u2014 which involved \u201chundreds of hours\u201d of research into more than 60,000 transactions that included bank account data, transactions by current and former employees, and other legacy expense data, says our source \u2014 Hampton Creek expensed closer to two percent of its net sales on buybacks over a much longer period\u00a0that began in 2014 and ended the following year.<\/p>\n

It\u2019s worth noting that Hampton Creek has never\u00a0denied buying back its own product from stores. Instead, it said last summer that the buybacks were for the purposes of quality control.<\/p>\n

Bloomberg\u2019s sources argued that\u00a0this narrative is false, with some former contractors telling Bloomberg they were asked to\u00a0impersonate teachers and caterers in calls to\u00a0local stores to order more Just Mayo. They were also reportedly told they could discard product they purchased.<\/p>\n

In the end, consumers will have to decide for themselves what\u00a0to\u00a0think. The same is true of\u00a0investors, some of whom may well decide\u00a0that Hampton Creek has been treated unfairly, and some of whom may be harder to convince<\/a>.<\/p>\n

As investor Marc Andreessen tweeted<\/a> last August in response to a Bloomberg report,\u00a0\u201cNo comment on specific companies, but make no mistake: Buying your own product to inflate your reported revenue is fraud.\u201d<\/p>\n

You can find Tetrick\u2019s note to employee below:<\/p>\n

Hey all,<\/em><\/p>\n

Several months ago, some inaccurate reporting led to SEC and DOJ Inquiries. As of today, both agencies closed their inquiries with no finding of wrongdoing by our company or any of our team members. It was the expected result by our leadership, board, and investors.<\/em><\/p>\n

We should all be proud of the great work we\u2019ve done in the last few months, from the opening of 3 labs to significant new discoveries to passing incumbents at some of the biggest retailers in the world.<\/em><\/p>\n

We\u2019ve got a lot of important work to do. I\u2019m grateful to continue doing it with you.<\/em><\/p>\n

Josh<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

\"\" The SEC and the Department of Justice, which had\u00a0launched preliminary inquiries into the vegan food company\u00a0Hampton Creek last summer, have officially closed their inquiries, according to founder and CEO Josh Tetrick. He informed the company’s 160-plus employees of the status change this morning in an email that you can find below. Tetrick called the news\u00a0“the expected result by… Read More<\/a><\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

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